Why A Revocable Living Trust Does Not Protect Assets From Medicaid Spend Down

Unfortunately, a revocable trust offers zero protection for Medicaid planning purposes. This basically means the individual is not shielded for Medicaid planning purposes if they plan and move their assets into a revocable trust.

This is actually a very big and dangerous minefield that is floating around, and a lot of cases regarding this come into my office, such a trust will not protect the assets from the nursing home.

Proper Planning Needs To Be Done By An Elder Law Lawyer Who Understands Medicaid Law.

A common occurrence weekly in my office is the children or the grandchildren of a nursing home applicant comes into my office because they get the first bill from the nursing home and the first question I ask them is whether their parents or grandparents had done any planning?

There are often cases where no planning was done at all, although sometimes clients do come in and tell me that their parent or grandparent had a trust done. If I find out there is a revocable trust, then I have to explain to them that even though that trust was done many years ago, it would not give any protection to their assets for nursing home care. Unfortunately, that individual would not qualify for Medicaid and they would have to pay the nursing home facility through private assets.

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This often happens when the revocable trust was drafted or planning was done by an estate planning attorney who was not well versed in Medicaid planning and asset protection from nursing homes. Chances are that attorney was strictly dealing with death issues, meaning that at death, the revocable trust would avoid probate for the assets that were placed into the trust.

Avoidance of probate is a good thing, but the revocable trust gives zero Medicaid protection, which ultimately means those assets are up for grabs in a situation where the person needs nursing home care.

Nursing Home Charges Can End Up Wiping Out The Estate

When the assets are only in a revocable trust and the person needs nursing home care the estate assets could be completely wiped out or severely depleted by being spent on the nursing home care. There might not be an estate left to pass on at death to the next generation which needs to avoid probate, because it was all used to pay for that individual’s care. Protecting the assets from the nursing home is by far the bigger and most important reason to plan and avoiding probate is the second important reason.

The proper trust should be an irrevocable Medicaid asset protection trust if you wish to protect assets from the nursing home and to avoid probate.

Those assets placed into the proper trust would not be up for grabs if everything was done in a timely manner and if assets were moved into the proper irrevocable Medicaid asset protection trust, provided they were beyond the five-year look back penalty period. The assets could then ultimately be passed onto the next generation and they would be able to avoid probate as well.

Make sure you contact an experienced and qualified estate planning attorney in your area or get legal assistance from an elder law lawyer. The Law Offices of Michael Camporeale P.C., based in New York, have extensive legal experience and dedication to the practice of elder law, estate planning, Medicaid planning, and asset protection from nursing homes in New York. We have offices located in Staten Island, New York, Brooklyn, Bronx, White Plains, Garden City, Melville, NY.

For more information on Which Trust Can Preserve Your Assets, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (718) 475-9639 today. We provide finest legal representation in Manhattan, White Plains, Bronx, Long Island, Staten Island, Brooklyn, and Queens, NY.

Get your questions answered - call me for your free phone consultation (718) 475-9639